University of Michigan defends use of endowment

ANN ARBOR -- The University of Michigan on Wednesday released a 21-page response it sent to two U.S. senators who have raised questions about how universities with huge endowments are handling tuition increases and helping low- and middle-income students.

The response echoes the position U-M has reiterated in recent years as its endowment has grown to $7.1 billion, the eighth largest in the country: The endowment is carefully monitored, investment gains are selectively spent and proceeds are a key source of financial aid for students.

In the report, filled with charts and explanations of U-M's endowment and tuition costs over the last 10 years, U-M President Mary Sue Coleman said "fund-raising for student aid is one of our highest priorities.''

The university's response points to a $40 million drop in state appropriations to the university since 2002 as a big factor in tuition increases. U-M officials said the university is trying to control its costs and has cut $117 million from its operations in recent years.

In that difficult financial environment, the endowment has helped maintain access to the university, they said. Last year, endowment spending contributed $205 million for university operations - including $47 million for scholarships and fellowships.

U-M now provides grants to 71 percent of its in-state students who apply for financial aid. Of those students, the average grant from the university was $3,522. Federal, state and private scholarships are also available, plus university loans and work study jobs,

Their report is in response to a query sent to 136 universities by Senate Finance Committee chairman Max Baucus, D-Mont., and Iowa Sen. Charles Grassley, the ranking member on the committee.

Prompted by public discussion in recent years about steadily increasing tuition costs despite some universities compiling multibillion-dollar endowments the senators asked the universities questions about their tuition, endowments, and how they are helping low- and middle-income students.

Some critics of higher education policies have said that universities should spend more from their endowments to help relieve the burden on students.

Tuition for in-state freshmen at U-M was $10,447 this fall, up 71 percent from $6,098 in fall 1998, charts in the report show. U-M's endowment, meanwhile, has grown more than 200 percent since 1998.